ON TOPIC

by
Irwin Rapoport

With the price of non-ferrous
metals declining rapidly in
the last couple months, as
well as the demand, the scrap
metal industry is being affected
from top to bottom.

To learn more about the current
market and where it may be
heading, American Recycler
recently spoke with Randy Goodman,
the chairman of ISRI’s nonferrous
division.

Why have prices for various
scrap metals fallen between
30 and 70 percent and how has
that affected demand for those
materials?

Goodman: As the first link
in the manufacturing chain,
scrap recyclers are affected
by manufacturing decline -
indeed, scrap has often been
a leading indicator for United
States economic activity because
basic materials manufacturers
are often the first to reduce
their purchases as the economy
slows down and the first to
start laying in inventory as
the economy regains strength.

Scrap prices saw an unprecedented
crash during an incredibly
short period. Since August
2008, copper prices declined
nearly 52 percent, aluminum
declined 35 percent, and steel
declined nearly 85 percent.
Never before has the decline
in prices or demand been so
sudden or severe across the
entire United States or global
scrap recycling industry.

When do you expect prices to
bottom out and how long will
it take for the values to rise
again? Will the increases be
incremental or dramatic?

Goodman: The disruption in
the supply chain for scrap
materials will be prolonged
by this economic contraction
for many more months since
scrap producers will not generate
significant amounts of scrap.
Collection of obsolete scrap
for sale to scrap processors
will also dwindle as people
hold off replacing old products
with new ones.

Moreover, scrap processors
already plagued with significant
inventories, purchased at high
prices, will not be anxious
to accumulate more scrap with
few if any orders likely in
the near term. As a result,
the supply chain for scrap
is broken and now will only
recuperate many months after
manufacturing production recovers.

That being said, I truly believe
that it is not an issue of
“whether it will return” but
rather “when it will return.”

Can more be done to ensure
that more scrap metal can be
recovered and will the drop
in scrap values affect salvage
operations, be they from C&D
or industrial operations?

Goodman: I think it is safe
to say that businesses are
in the business of making money
and as the value of scrap falls,
the economics of bringing costly
scrap to the marketplace becomes
unprofitable. There are certain
projects in the pipeline that
will continue and some that
will be put off until the economy
gets better.

How will the decline in automobile
production affect the demand
for scrap metals domestically
and overall, what is your take
on global demand for scrap
metals?

Goodman: Auto production has
been rumored to have dropped
from 17 million units to 12
million units in 2008. This
is going to have a huge demand
impact of both ferrous and
nonferrous scrap demands in
the United States and around
the world.

Is the scrap industry seeking
legislative and regulatory
changes from the federal and
state governments? What would
your immediate priorities be
in terms of legislation and
regulations?

Goodman: We
have not heard of any such
legislative package and ISRI
has not been seeking any specific
package at this time. The best
we could hope for is an economic
stimulus package to get our
economy rolling again, to prime
the pump again on the demand
side.